Receive the latest local updates in your inbox

A San Diego woman may have to pay more than $15,000 for renting rooms in her home through the home-sharing website Airbnb despite a city order to cease operations.

On Aug. 5, an administrative hearing officer ruled Rachel Smith, a 70-year-old retired schoolteacher, violated the city’s law against operating a bed and breakfast without permit.

In her decision, hearing officer Catriona Miller wrote that Smith had accrued $22,400 in civil penalties, but she would only have to pay $15,000 — plus $2,968 in city investigation fees — if she stopped renting her rooms and has no similar offenses for two years.

Smith began listing her 1912 Craftsman home located in Burlingame, east of Balboa Park, on Airbnb in May 2012, offering two rooms for $80 each per night. While she initially considered opening up her house as a bed and breakfast, she liked the discretion that the website offered.

Politically Speaking: Airbnb Confusion, Controversy

San Diego City Councilman Chris Cate, attorney Omar Passons and Clairemont resident Scott Gruby take on issues surrounding hosts that take on short-term leases through the website.

But neighbors soon took a disliking to what they called the “revolving door” of strangers taking up parking and roaming about their area. By September 2013, they started taking their complaints to the city of San Diego.

After two visits from a city inspector in October 2013 and May 2014, the city mailed Smith a civil penalty notice and order (CPNO) in August 2014, telling her that she must cease operation of the bed and breakfast.

However, Smith vehemently denied that her Airbnb rentals qualified as a bed and breakfast. As she tried to determine where Airbnb fell into city codes, Smith continued to rent out her rooms until Nov. 23, 2014, when her attorney advised her to halt until the matter was settled in court.

According to Miller’s decision, Smith made about $13,800 from room rentals since the October 2013 inspection.

“She did not feel she should have to cease renting through Airbnb unless and until a judge told her she could not,” Miller wrote in her findings. “She believed the city was wrong in its application of the Bed and Breakfast law to the Airbnb rentals and did not have the authority to stop her.”

SD Explained: Airbnb Regulations

City leaders are still trying to figure out how they will regulate airbnb, a website and app that allow people to rent out their homes or rooms to guests. NBC 7's Catherine Garcia and the Voice of San Diego's Lisa Halverstadt have more in the latest edition of San Diego Explained.

(Published Wednesday, Feb. 25, 2015)

While the city has no specific code addressing short-term rentals, Miller said Smith’s case does fall under the bed and breakfast code, which requires a conditional use permit, because she used her primary residence to provide lodging for less than 30 days to paying guests.

Smith was ordered to pay $200 for every day she did not comply with the city’s order to cease and desist: 112 days. She will have to pay $15,000 of that to the city treasurer in the next 60 days.

Smith’s attorney Omar Passons said they are still evaluating options to appeal.

“The issue in my client’s case is not whether you believe people should be allowed to rent their primary home (or rooms in their home) on a short term basis in residential zones. That is a policy issue. The issue in my case is whether the law the city used to go after my client actually makes her use illegal.

“The city collected transient occupancy tax from my client while at the same time hitting her with penalties for the very use the tax was for. I am surprised about the recent Airbnb tax deal with the city given its position about listing on Airbnb.

“Fearing huge fines, my client stopped doing Airbnb three months before the hearing and the city kept pushing anyway. My client’s house was never a party haven or one of those overcrowded menaces in the beach communities.”

Miller’s ruling is considered a draft final decision, and city attorney spokesman Gerry Braun told NBC 7 a final ruling still must be made.

Airbnb itself weighed in on Smith's side, sending a letter to Mayor Kevin Faulconer and the San Diego City Council. In it, David Owen with Airbnb's public policy department said city leaders have acknowledged that San Diego's code in regards to home sharing is confusing and needs clarification.

"While the City Council is considering ordinance and code changes that would address this activity, regular San Diegans like Rachel should not be penalized. Accordingly, we are calling for the City to stay the full amount of Ms. Smith’s fine and suspend enforcement efforts against other home sharers until the City Council completes its consideration of these code changes. This is not an uncommon practice for the many cities who are currently navigating short term rental reform. For example, the City of Boston has done this as opposed to trying to target their own citizens trying to earn extra income."